DCIT circle-31 (1), New Delhi V. Surya Kiran Maintenence Society (Regd), New Delhi

ITA 2728/DEL/2008

• Counselvise Citation: 272820114 RSA 2008
• Duration Of Justice: 3 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 01-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTHY
• Assessee Lawyers: LALITA KRISHNAMURTHYAR
• Keywords: Source of fund; Deemed to accrue or arise in india; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENC H BEFORE SHRI RAJPAL YADAV, JM & SHRI A.N. PAHUJA, A M ITA NO. 2728/DEL/2008 ASSESSMENT YEAR: 2004-05 DCIT CIRCLE- 31(1), C.R. BUILDING, NEW DELHI V/S . M/S SURYA KIRAN MAINTENANCE SOCIETY (REGD.),SURYA KIRAN BUILDING,19, KASTURBA GANDHI MARG, NEW DELHI . [PAN: AACTS4927N] (APPELLANT) (RESPONDENT) ITA NO. 2837/DEL/2008 ASSESSMENT YEAR: 2004-05 M/S SURYA KIRAN MAINTENANCE SOCIETY (REGD.),SURYA KIRAN BUILDING, 19, KASTURBA GANDHI MARG NEW DELHI . V/S . ITO WARD- 31(4), C.R. BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 4379/DEL/2010 ASSESSMENT YEAR: 2007-08 ITO WARD- 31(2),ROOM NO. 334A, C.R. BUILDING, NEW DELHI V/S . M/S SURYA KIRAN MAINTENANCE SOCIETY (REGD.),SURYA KIRAN BUILDING, 19, KASTURBA GANDHI MARG, NEW DELHI . (APPELLANT) (RESPONDENT) CROSS OBJECTION NO. 381/DEL/2011 (IN ITA NO. 4379/DEL/2011) ASSESSMENT YEAR: 2007-08 M/S SURYA KIRAN MAINTENANCE SOCIETY (REGD.),SURYA KIRAN BUILDING, 19, KASTURBA GANDHI MARG, NEW DELHI . V/S . ITO WARD- 31(2), ROOM NO. 334A C.R. BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 2 ASSESSEE BY SMT. LALITA KRISHNAMURTHY,AR REVENUE BY SMT. S. MOHANTHY ,DR DATE OF HEARING 1-12-2011 DATE OF PRONOUNCEMENT 16-12-2011 O R D E R A.N. PAHUJA: THESE FOUR APPEALS- CROSS APPEALS FOR THE A.Y. 2004 - 05 FILED ON 19.8.2008 BY THE REVENUE AND ON 3.9.200 8 BY THE ASSESSEE AGAINST AN ORDER DATED 12 TH MAY, 2008 AND APPEAL FILED ON 28.9.2010 BY THE REVENUE FOR THE A.Y. 2007-08 AND THE CORRESPOND ING CROSS OBJECTION[CO] FILED ON 24.11.2011 BY THE ASSESSEE A GAINST AN ORDER DATED 13 TH AUGUST, 2010 OF THE LD. CIT(A)-XXVI, NEW DELHI, RA ISE THE FOLLOWING GROUNDS: - ITA NO. 2728/D/2008:[REVENUE] IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 8,73,709/- AND OF ` 5,40,045/- MADE ON ACCOUNT OF UNSPENT BALANCE OF CONTRIBUTIONS FROM MEMBERS AND TENANTS AND ON ACCOU NT OF INTEREST EARNED ON DEPOSITS RESPECTIVELY. ITA NO. 2837/D/08:[ASSESSEE] - 1. THAT ONCE THE LD. CIT(A) HAS ARRIVED AT A FINDI NG THAT THE ASSESSEE IS A MUTUAL BENEFIT SOCIETY AND HAS EXEMPT ED THE TOTAL INCOME ASSESSED BY AO FROM LEVY OF TAX, T HEN THE TAXATION OF ` 20,94,130/- BEING SURPLUS OF INCOME OVER EXPENDITURE CONTRIBUTED EITHER BY FLAT OWNER O R BY TENANT ON BEHALF OF FLAT OWNER, IS CONTRARY TO HIS OWN FINDING, AND DESERVES TO BE EXPUNGED AND DELETED. 2. THAT WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, CONTRIBUTIONS MADE BY FLAT OWNER OR BY TENANT ON BE HALF OF FLAT OWNER FOR MAINTENANCE OF SURYA KIRAN BUILDI NG BY THE ASSESSEE SOCIETY AND CARRIED OUT IN SUBSEQUENT YEARS, IS IN FACT A FORM OF TRUST MONEY FOR WORK TO BE EXECUTED IN SUBSEQUENT YEARS AND/OR A FORM OF ADVAN CE REIMBURSEMENT OF EXPENSES AND CONSEQUENTLY THE SUSTAINING OF ADDITION OF ` 20,94,130/- IS BAD IN LAW AND SHOULD BE DELETED. ITA NO. 4379/D/10[REVENUE] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF ` 38,91,961/- ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 3 AND OF ` 13,98,508/- MADE ON ACCOUNT OF UNSPENT BALANCE OF CONTRIBUTIONS FROM MEMBERS AND NON-MEMBERS AND ON ACCOUNT OF INTEREST EARNED ON DEPOSITS RESPECTIVELY . CO NO. 381/D/11[ASSESSEE] THAT WITHOUT PREJUDICE TO THE PRINCIPLE OF MUTUALI TY AS CLAIMED BY THE ASSESSEE, THE LD. AO OUGHT NOT TO HA VE TAXED THE GROSS RECEIPTS COLLECTED FOR THE MAINTENANCE AN D UPKEEP OF THE BUILDING AND RECEIPTS INCIDENTAL THERETO BUT SHOULD HAVE CONSIDERED AND REDUCED THE EXPENSES INCURRED O N SUCH MAINTENANCE AND UPKEEP, FOR WHICH PURPOSE SUCH AMOUNTS WERE RECEIVED. SINCE ISSUES IN THESE APPEALS WERE SIMILAR, THESE APPEALS WERE HEARD SIMULTANEOUSLY FOR THE SAKE OF CONVENIENCE AND ARE BEING DISPOSED OF THROUGH THIS COMMON ORDER. 2. ADVERTING FIRST TO THE GROUNDS RAISED IN THE C ROSS-APPEALS FOR THE A.Y. 2004-05,FACTS, IN BRIEF, AS PER RELEVANT ORDER S ARE THAT RETURN DECLARING INCOME OF ` 35,07,883/- FILED ON 27.10.2004 BY THE ASSESSEE, PROVIDING VARIOUS FACILITIES TO THE MEMBERS OF THE AFORESAID SOCIETY, BEING FLAT OWNERS, AFTER BEING PROCESSED ON 21.12.2004 U/ S 143(1) OF THE INCOME TAX ACT, 1961( HEREINAFTER REFERRED TO AS TH E ACT], WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2 ) OF THE ACT ISSUED ON 1 ST AUGUST, 2005. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE ASSESSING OFFICER (AO IN SHORT) NOTICED THAT THE I NCOME OF ` 35,07,883/- INCLUDED INTEREST ON FDR- ` 3,59,928/- INTEREST FROM ANSAL PROPERTIES - ` 63,800/- AND INTEREST FROM BALANCE IN SAVING BANK A CCOUNT-. ` 1,16,316/-. THE REMAINING RECEIPTS WERE FROM MEMBERS OF THE SOC IETY. RELYING UPON THE DECISIONS IN SPORTS CLUB OF GUJARAT LTD. VS. CI T, 171 ITR 504 (GUJ.), RAJPATH CLUB LTD. VS. CIT, 211 ITR 379 (GUJ.) AND C IT VS. RANCHI CLUB,196 ITR 137(PAT.), THE AO CONCLUDED THAT PRINC IPLES OF MUTUALITY WERE NOT APPLICABLE TO INTEREST INCOME, AS CLAIMED BY THE ASSESSEE AND ACCORDINGLY, BROUGHT TO TAX THE AFORESAID INTEREST INCOME . 2.1. THE AO FURTHER NOTICED THAT THE SOCIETY RE CEIVED CONTRIBUTIONS FROM TENANTS OF THE FLAT OWNERS I.E. NON-MEMBERS. OUT OF 214 FLATS, 151 ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 4 WERE OCCUPIED BY THE TENANTS. SINCE THE MAINTENANC E CHARGES WERE PAID BY THE TENANTS THEMSELVES AND NOT THE MEMBERS , THE AO ALLOCATED ` 8,73,709/- TO MEMBERS OUT OF SURPLUS OF ` 29,67,839/-.AS REGARDS CONTRIBUTION BY THE TENANTS, SINCE IDENTITY BETWEEN THE CONTRIBUTORS AND PARTICIPATORS WAS FOUND TO BE COMPLETELY LOST, RELY ING UPON THE DECISION IN CIT VS. BANKIPUR CLUB LTD. 226 ITR 97(SC), THE AO CONCLUDED THAT TRANSACTIONS WITH NON-MEMBERS WERE TAINTED WITH COM MERCIALITY AND PROFIT MAKING MOTIVE, THE CHARGES BEING ON FIXED B ASIS I.E. PER SQ. FT. OF AREA UNDER OCCUPATION AND HAD NO RELATION WITH THE EXPENDITURE INCURRED FOR MAINTENANCE. ACCORDINGLY, THE AMOUNT OF ` 20,94,130/- FROM NON- MEMBERS, WAS BROUGHT TO TAX.. 2.2 MOREOVER, SINCE THE MEMBERS DID NOT HAV E CONTROL OVER FUNDS OF THE SOCIETY WHILE REFERRING TO PARA 13 OF THE MEMOR ANDUM OF ASSOCIATION OF THE SOCIETY, THE AO FURTHER CONCLUDED THAT EVEN RECEIPTS OF ` 8,73,709/- COULD NOT BE CLAIMED EXEMPT IN VIEW OF DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN HARYANA STATE COOPER ATIVE LABOUR & CONSTRUCTION FEDERATION LTD. VS. CIT, 252 ITR 265 ( P&H) AND CHELMSFORD CLUB, 243 ITR 89 (SC). 3.. FOLLOWING HIS FINDINGS IN THE A.Y. 2004-05, TH E AO BROUGHT TO TAX INTEREST INCOME OF ` 13,56,336/- ON ACCOUNT OF FDR, INTEREST FROM BALANCE IN SAVING BANK ACCOUNT- ` 42,172/- BESIDES ` 38,91,961/- ON ACCOUNT OF CONTRIBUTION FROM MEMBERS AND NON-MEMBER S. 4. ON APPEAL, THE LD. CIT(A) WHILE REFERRING TO TH E DECISIONS IN , DIT(E) VS ALL INDIA ORIENTAL BANK OF COMMERCE WELFA RE SOCIETY , 184 CTR 274 (DEL.); THE COUNTRY CLUB IN ITA 84/2003 (DEL.). AND. SHIVALIKA COOPERATIVE GROUP HOUSING SOCIETY LTD. (DEL.), 101 ITD 391(DEL.) CONCLUDED ON THE TAXABILITY OF INTEREST INCOME IN THE FOLLOWING TERMS: I HAVE HEARD THE AR AND HAVE CAREFULLY PERUSED THE RECORD WITH REFERENCE TO THE WRITTEN SUBMISSIONS FI LED BY THE APPELLANT SOCIETY. IF FIND THAT THE ISSUE IS SQUAR ELY COVERED BY TWO DECISIONS OF THE HONBLE DELHI HIGH COURT ALL INDIA ORIENTAL BANK (SUPRA) AND THE COUNTRY CLUB (SUPRA). IN THE ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 5 CASE OF THE COUNTRY CLUB THE HONBLE LORDSHIPS OF T HE HIGH COURT OF DELHI HAD HELD AS FOLLOWS: THE ASSESSEE CLUB EARNS INCOME FROM ITS MEMBERS AN D THEIR GUESTS. SURPLUS FUNDS ARE DEPOSITED IN BANKS AND THESE SURPLUS FUNDS ARE ATTRIBUTABLE TO AMOUNTS REC EIVED FROM MEMBERS OF THE ASSESSEE CLUB TOWARDS THEIR DUE S AND FOR EXPENSES INCURRED BY MEMBERS AND THEIR GUESTS I N RESTAURANTS AND OTHER FACILITIES OF THE CLUB LIKE B ILLIARD ROOM, TENNIS AND SQUASH COURTS AND SWIMMING POOL, E TC. THERE IS NO DISPUTE ABOUT THE FACT THAT ALL THESE F ACILITIES ARE AVAILABLE ONLY TO MEMBERS OF THE ASSESSEE CLUB AND THEIR GUESTS. APPLYING THE DOCTRINE OF MUTUALITY, THE TRIBUNAL HE LD THAT INCOME RECEIVED BY THE ASSESSEE FOR THE USE OF FACI LITIES BY GUESTS OF THE MEMBERS IS EXEMPT FROM TAXATION. THI S BEING THE POSITION, WE ARE OF THE VIEW THAT DEPOSITS MADE AS A RESULT OF THIS INCOME RECEIVED AND THE INTEREST REC EIVED THEREON FROM THE BANKS CANNOT BE SAID TO BE OUTSIDE THE DOCTRINE OF MUTUALITY. LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPON DIT VS . ALL INDIA ORIENTAL BANK OF COMMERCE WELFARE SOCIETY, [2 003] 130 TAXMAN 575 (DEL.), IN WHICH THIS COURT HAS RELI ED UPON IN CHELMSFORD CLUB VS. CIT [2000] 243 ITR 89 (SC). IT WAS HELD, FOLLOWING THE DECISION OF THE SC, THAT WHERE A NUMBER OF PERSONS COMBINE TO CONTRIBUTE TO A COMMON FUND A ND HAVE NO DEALINGS OR RELATIONS WITH ANY OTHER BODY, THEN ANY SURPLUS GENERATED CANNOT, IN ANY SENSE BE REGAR DED AS PROFITS CHARGEABLE OF TAX. ON THIS BASIS, THE DOCT RINE OF MUTUALITY WAS APPLIED TO THE FACTS OF THAT CASE. W E SEE NO DISTINCTION IN THE DECISION RENDERED BY THIS COURT IN ALL INDIA ORIENTAL BANK OF COMMERCE WELFARE SOCIETY AND THE PRESENT CASE. UNDER THE CIRCUMSTANCES, WE ANSWER THE QUESTION OF LAW IN THE AFFIRMATIVE, IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE. I, THEREFORE, HOLD RESPECTFULLY FOLLOWING THE DECISIONS OF THE HONBLE DELHI HIGH COURT AND THE D ECISION OF THE HONBLE DELHI TRIBUNAL IN SHIVALIKA COOPERATIVE GROUP HOUSING SOCIETY LTD. (SUPRA) THAT THE INTEREST INCO ME OF RS. 5,40,045/- IS EXEMPTED ON THE PRINCIPLE OF MUTUALIT Y AND DELETE THE ADDITION MADE BY THE INCOME TAX OFFICER. 4.1. AS REGARDS, THE AMOUNT OF ` 8,73,709/- ALLOCATED BY THE AO TO MEMBERS, THE LD. CIT(A) DELETED THE ADDITION IN THE LIGHT OF PRINCIPLES LAID ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 6 DOWN IN THE CASE OF BANKIPUR CLUB LTD.,226 ITR 97(S C) IN THE FOLLOWING TERMS: I HAVE HEARD THE AUTHORISED REPRESENTATIVE AND H AVE CAREFULLY PERUSED THE RECORD WITH REFERENCE TO THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT SOCIETY. I FIND THAT THE INCOME TAX OFFICER HAD NOT FULLY REPRODUCED CLAUSE 13 OF THE MEMORANDUM OF ASSOCIATION OF THE APPELLANT SOCIETY (COPY OF THE MEMORANDUM OF ASSOCIATION OF THE APPELLANT S OCIETY HAS BEEN PLACED AT PAGES 7 TO 17 OF THE PAPER BOOK) .CLAUSE 13 FURTHER GOES TO SAY THAT IF UPON DISSOLUTION, TH ERE REMAINS ANY PROPERTY, WHATSOEVER AFTER SATISFACTION OF ITS DEBTS AND LIABILITIES, THE SAME SHALL NOT BE DISTRIBUTED AMON G THE MEMBERS OF THE SOCIETY OR ANY ONE OF THEM, BUT SHAL L BE GIVEN TO SOME OTHER SOCIETY WHICH SHALL BE AGREED U PON BY AT LEAST 3/5 OF THE MEMBERS PRESENT PERSONALLY OR B Y PROXY, AT THE TIME OF DISSOLUTION. THIS CLEARLY MEANS THAT THE MEMBERS OF THE APPELLANT SOCIETY TOGETHER ARE IN FU LL CONTROL OF THE COMMON FUND THROUGH THEIR VOTING POWER. THEY HAVE A RIGHT TO VOTE AND DECIDE THE DESTINY OF THE APPELLA NT SOCIETY ON WINDINGS UP. I FIND THAT IN WEST GODAVARI DISTRI CT RICE MILLERS ASSOCIATIONM150 ITR 394(AP),IT WAS HELD THA T THE PARTICIPATION ENVISAGED IN THE PRINCIPLES OF MUTUAL ITY IS NOT THAT THE MEMBERS SHOULD TAKE SURPLUS TO THEMSELVES .IT IS ENOUGH THAT THEY HAVE A RIGHT OF DISPOSAL OVER THE SURPLUS. IN FACT SUCH A CLAUSE IS MANDATORY IN ALL BODIES THAT ARE REGISTERED AS A SOCIETY UNDER SECTION 14 OF THE SOC IETIES REGISTRATION ACT,1860. I THEREFORE, RESPECTFULLY FOLLOWING THE AFORESTATED DECISIONS RELIED UPON BY THE APPELLANT HOLD THAT AS ON WINDIN G UP THE SURPLUS OF THE APPELLANT SOCIETY IS AVAILABLE FOR D ISPOSAL ONLY IN ACCORDANCE WITH THE DECISION OF THE MEMBERS, THE FUNDS OF THE APPELLANT SOCIETY ARE FULLY UNDER THE CONTROL O F ITS MEMBERS ON THE RATIO OF THE PRINCIPLE LAID DOWN IN BAKIPUR CLUB LTD. (SUPRA) THE AMOUNT OF RS. 8,73,709/- IS C OVERED UNDER THE PRINCIPLE OF MUTUALITY AND SHOULD HAVE BE EN EXEMPTED FROM TAXATION BY THE INCOME TAX OFFICER. I ACCORDINGLY DELETE THE ADDITION OF RS. 8,73,709/-. 4.2. HOWEVER, THE LD. CIT(A) UPHELD THE ADDITION OF ` . 20,94,130/- ON ACCOUNT OF RECEIPTS FROM NON-MEMBERS, HOLDING AS UN DER: I HAVE HEARD THE AUTHORIZED REPRESENTATIVE AND HAV E CAREFULLY PERUSED THE RECORD WITH REFERENCE TO THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT SOCIETY. UNDER C LAUSE 14 OF THE RULES AND REGULATIONS OF THE APPELLANT SOCIE TY READ WITH CLAUSE 15 OF THE FLAT BUYERS AGREEMENT THE BUY ER AGREES TO CONTRIBUTE AND PAY HIS/HER SHARE PROPORTI ONATE TO THE FLAT AREA TOWARDS THE COST, EXPENSES AND OUTGOI NGS OF THE COLLECTIVE MAINTENANCE SOCIETY. IT IS SEEN THAT AS PER THE ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 7 CLAUSES OF THE AGREEMENT THE APPELLANT SOCIETY PLAC ES THE LIABILITY OF PAYMENT OF MONTHLY SUBSCRIPTION ON THE FLAT OWNER/MEMBER ONLY. IT DOES NOT RECOGNIZE ANY TENANT /NON- MEMBER WHEREAS THE PAYMENT IN CERTAIN CASES HAS BEE N MADE ADMITTEDLY BY NON-MEMBERS/TENANTS. THE ISSUE I S WHETHER ANYBODY ELSE CAN MAKE THE PAYMENT ON BEHALF OF THE MEMBER TO THE SOCIETY FOR THE SERVICES ACTUALLY UTILIZED BY THOSE OTHERS AND STILL THE APPELLANT SOCIETY CAN CL AIM THE EXISTENCE OF PRINCIPLE OF MUTUALITY? DURING THE COURSE OF THE APPELLATE PROCEEDINGS IT H AS BEEN STATED BY THE APPELLANT THAT THE APPELLANT SOCIETY HAS BEEN SET UP AS A MUTUAL BENEFIT SOCIETY TO AFFORD TO ITS MEMBERS CERTAIN FACILITIES. IT IS STATED THAT THE SOCIETY C ARRIES OUT ITS ACTIVITIES ON NO PROFIT NO LOSS BASIS I.E. ON THE B ASIS OF PRINCIPLE OF MUTUALITY. IT IS STATED THAT THE RECEI PTS OF THE APPELLANT COMPRISE OF INCOMINGS ON ACCOUNT OF MAINT ENANCE CHARGES IN RESPECT OF ALL FLATS IN SURYA KIRAN BUIL DING AND THE INTEREST RECEIVED FROM BANK ON DEPOSITS OF THE AVAI LABLE AMOUNT AT ANY GIVEN TIME PENDING UTILIZATION. THIS INCOMING AMOUNT IS STATEDLY SPENT ON BUILDING MAINTENANCE ST AFF SALARY AND SUNDRY EXPENSES ETC. IT IS SEEN THAT THE AO HAS TAXED THE SURPLUS OF RS.20,94,1301- ON THE GROUND THAT THE CONTRIBUTORS TO THE FUND ARE TENANTS WHEREAS ON THE OTHER HAND THE SOCIETY RECOGNIZES ONLY THE OWNERS/MEMBERS , CONCLUDING THEREBY THAT THE IDENTITY BETWEEN THE CO NTRIBUTORS AND THE PARTICIPATORS IS COMPLETELY LOST. UNDER CLA USE 14& 15 OF THE FLAT BUYERS AGREEMENT, IT IS THE BUYER WHO A GREES TO CONTRIBUTE AND PAY HIS SHARE PROPORTIONATE TO THE A REA OF THE FLAT TOWARDS COSTS/EXPENSES AND OUTGOINGS ETC. IN R ESPECT OF THE MATTERS SPECIFIED IN THE SECOND SCHEDULE TO THE ABOVE MENTIONED AGREEMENT. THESE CLAUSES ARE STATED BY TH E APPELLANT TO BE CONCLUSIVE, FINAL AND BINDING ON TH E BUYER. IT IS STATED THAT SO FAR AS THE APPELLANT SOCIETY IS C ONCERNED, THE LIABILITY FOR MONTHLY SUBSCRIPTION IS THAT OF T HE FLAT OWNER/MEMBER ONLY. HOWEVER, THE APPELLANT HAS TAKEN THE STAND THAT HOW AND IN WHAT MANNER SUCH LIABILITY WI LL BE DISCHARGED BY THE MEMBER IS A QUESTION ONLY OF MUTU AL ARRANGEMENT BETWEEN THE FLAT OWNER AND THE TENANT/OCCUPIER. IT IS ALSO STATED THAT HYPOTHETICA LLY SPEAKING IF THE APPELLANT SOCIETY DID NOT EXIST, ALL THESE F ACILITIES LIKE PAINTING OF BUILDING, SERVICE AND OPERATION OF LIFT S ETC. WOULD HAVE TO BE ARRANGED BY INDIVIDUAL FLAT OWNERS WHO A RE PERMANENTS. IT IS STATED THAT THE APPELLANT SOCIETY ACTS ONLY AS AN AGENT OF THE FLAT OWNER AND NOT THAT OF THE O CCUPIER. ON THIS GROUND THE APPELLANT HAS CONTENDED THAT THERE IS NO TAINT OF COMMERCIALITY IN THE ACTIVITIES OF THE APPELLANT SOCIETY AND HENCE THE PRINCIPLE OF MUTUALITY WILL SQUARELY APPL Y. THE ABOVE CONTENTIONS OF THE APPELLANT HAVE BEEN CA REFULLY EXAMINED ALONG WITH THE ASSESSMENT ORDER PASSED BY THE ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 8 AO. FROM THE ABOVE CERTAIN FACTS EMERGE. FIRSTLY TH AT SOME OF THE FLATS HAVE BEEN GIVEN TO TENANTS AND THE MON THLY SUBSCRIPTIONS HAVE ALSO BEEN MADE BY SUCH TENANTS W HO ARE IN FACT NOT MEMBERS OF SOCIETY. THE AR'S CONTENTION THAT WHETHER THE MEMBER MAKES THE PAYMENT HIMSELF OR SOMEBODY ELSE PAYS OR THE ME MBER PAYS BY BORROWING FROM ANYONE ELSE OR FROM A TENANT IS IMMATERIAL, CANNOT BE ACCEPTED. THIS IS SO BECAUSE THE SERVICES AND UTILITIES HAVE BEEN FOUND BY THE AO TO BE UTILIZED BY VARIOUS TENANTS TO WHOM VARIOUS PREMISE S HAVE BEEN SUB-LET BY THE FLAT OWNERS/MEMBERS. BUT THESE TENANTS ARE NOT RECOGNIZED BY THE APPELLANT SOCIETY AS ITS CONSTITUENT MEMBERS. IN OTHER WORDS IT CAN BE SAID THAT IN SOME CASES UTILITIES HAVE BEEN ACTUALLY ENJOYED BY THE NON-MEM BERS/ TENANTS AND THE PAYMENTS HAVE BEEN CAMOUFLAGED AS HAVING BEEN PAID BY THE MEMBERS THEMSELVES. THE APPELLANT ALSO ADMITS THAT IN SOME CASES THE TENANT DIRECTLY PAYS TO THE SOCIETY WHEREAS IN OTHER CASES, THE TEN ANTS MAKE THE PAYMENTS THROUGH THE MEMBERS. THE LD. AR O F THE APPELLANT ADMITS THAT IN SOME CASES IN FACT THE CON TRIBUTIONS ARE ACTUALLY MADE BY THE TENANTS WHO ARE ALSO ADMIT TEDLY NOT MEMBERS OF THE SOCIETY. THEREFORE, THE LD. AR CONTE NTION THAT PAYMENT OF PERIODIC CONTRIBUTION TO THE SOCIET Y WAS AN INTERNAL MATTER BETWEEN THE TENANT AND THE FLAT OWN ER AND THAT IT WAS A MUTUAL ARRANGEMENT BETWEEN THE TWO OF THEM CANNOT BE ACCEPTED. THE AO HAS SPECIFICALLY FOUND T HAT SINCE THE FLATS HAVE BEEN SUB-LET AND PERIODIC PAYM ENTS ARE ACCEPTED FROM TENANTS, IT CANNOT BE SAID THAT THERE WAS NO TAINT OF COMMERCIALITY INVOLVED IN THE ACTIVITIES O F THE APPELLANT SOCIETY SO FAR AS THESE CONTRIBUTIONS PAI D BY THE TENANTS ARE CONCERNED. TO THE EXTENT OF THESE PAYME NTS WHICH ARE MADE ACTUALLY BY THE TENANTS AND RECEIVED BY THE SOCIETY AS SUCH, PAYMENTS ARE EMANATING FROM THE TE NANTS AND NOT FROM THE MEMBERS OF THE SOCIETY, THEREFORE, THE PRINCIPLE OF MUTUALITY STANDS DILUTED TO THAT EXTEN T. THEREFORE, IT IS CONCLUDED THAT VARIOUS FACILITIES HAVE BEEN I N FACT AVAILED OF BY NON MEMBERS WHICH WERE ACTUALLY AS PER THE TE RMS AND CONDITIONS OF THE AGREEMENT TO BE ENJOYED ONLY BY T HE MEMBERS AGAINST PAYMENT OF PERIODIC CHARGES, WHICH CLEARLY DOES NOT FALL IN THE LINE WITH THE PRINCIPLE OF MUT UALITY. THE APPELLANT HAS RELIED .UPON THE CASE OF INDUSTRIAL E NGINEERING PROJECTS PRIVATE LIMITED 202ITR 1014 (DEL) STATING THAT REIMBURSEMENT OF EXPENSES CAN UNDER NO CIRCUMSTANCE S BE REGARDED AS A REVENUE RECEIPT. THE APPELLANT HAS CO NTENDED THAT WHATEVER HAS BEEN COLLECTED BY THE SOCIETY - W HETHER IT BE FROM MEMBERS OR FROM NON-MEMBERS HAS BEEN ULTIMA TELY SPENT ON THE WELFARE OF THE MEMBERS OF THE SOCIETY ONLY. THEREFORE, THESE CONTRIBUTIONS RECEIVED COMPRISE OF REIMBURSEMENT OF CERTAIN EXPENSES INCURRED OR TO BE INCURRED BY THE SOCIETY ONLY. UNDER 'THE CIRCUMSTANCES IT IS ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 9 CONTENDED THAT SUCH RECEIPTS WHICH ARE ACTUALLY IN THE NATURE OF REIMBURSEMENT CANNOT BE TREATED AS REVENUE RECEI PTS. THE ABOVE CASE LAW HAS BEEN EXAMINED WITH REFERENCE TO THE FACT OF THE APPELLANT'S CASE. IT IS SEEN THAT T HE APPELLANT SOCIETY COLLECTS THE MONEY FROM THE MEMBERS ONLY AN D THEN EXPENDS IT ON VARIOUS MAINTENANCE AND WELFARE ACTIVITIES. THERE IS NO INITIAL CORPUS AVAILABLE WITH THE SOCIE TY OUT OF WHICH EXPENDITURE CAN BE INCURRED WHICH COULD BE REIMBURSED TO THE SOCIETY BY THE MEMBERS LATER ON. EVEN IF IT IS ACCEPTED THAT EXPENSES INCURRED ALSO INCLUDE EX PENSES TO BE INCURRED IN SUBSEQUENT TIME BY THE MAINTENANCE S OCIETY, IT CANNOT AMOUNT TO ACCEPTANCE OF THE PRINCIPLE OF MUTUALITY IN THE APPELLANT'S CASE WHEN THE CONTRIBUTIONS ARE RECEIVED IN THE FIRST PLACE FROM INDIVIDUALS/TENANTS/NON-MEMBER S. THIS IS SPECIALLY SO BECAUSE ON THE ONE HAND THE APPELLANT SOCIETY DOES NOT RECOGNIZE THE NON-MEMBERS AS PER CLAUSE 14 & 15 OF THE AGREEMENT MENTIONED ABOVE AND SECONDLY THAT ON THE OTHER HAND THE CONTRIBUTIONS FROM SUCH NON-MEMBERS ARE CLAIMED BY THE APPELLANT SOCIETY TO BE IN THE NATUR E OF REIMBURSEMENT EXPENSES ON ACCOUNT OF EXPENDITURE IN CURRED ON BEHALF OF THE MEMBERS OF THE SOCIETY. HENCE, THE RELIANCE PLACED ON THIS JUDICIAL PRONOUNCEMENT APPARENTLY DO ES NOT HELP THE APPELLANT. THE APPELLANT HAS ALSO PLACED R ELIANCE ON 243 ITR 89- CHELMSFORD CLUB (SC) WHEREIN THE SUPREM E COURT UPHELD THE IMPOSSIBILITY THAT CONTRIBUTORS SH OULD DERIVE PROFIT FROM CONTRIBUTIONS MADE BY THEMSELVES TO A F UND WHICH COULD ONLY BE EXPENDED OR RETURNED TO THEMSELVES. I T WAS ALSO STATED THAT WHERE A NUMBER OF PERSONS COMBINE TOGETHER AND CONTRIBUTE TO A COMMON FUND FOR FINANC ING OF SOME VENTURE OR OBJECT AND IN THIS RESPECT HAVE NO DEALINGS OR RELATIONS WITH ANY OUTSIDE BODY, THEN ANY SURPLU S RETURNED TO THOSE PERSONS CANNOT BE REGARDED IN ANY SENSE AS PROFIT. THE FACTS OF THIS JUDICIAL PRONOUNCEMENT HAVE ALSO BEEN EXAMINED VIS-A-VIS THE FACTS OF THE PRESENT CASE. W HEREAS THE CHELMSFORD CLUB DECISION APPLIES TO THAT CONGRE GATION OF PERSONS WHO HAVE NO DEALINGS OR RELATIONS WITH ANY 'OUT-SIDE BODY',IN THE PRESENT CASE THE COLLECTIONS HAVE BEEN MADE FROM NON-MEMBERS AND SUCH PERSONS WHO ARE MERELY TENANTS/OCCUPIERS OF THE FLATS. SUCH OUTSIDERS WHOM THE SOCIETY NOT EVEN RECOGNIZES CANNOT BE EQUATED WITH THE ORIGINAL MEMBERS WHO HAD COME TOGETHER IN THE FIRST PLACE TO FORM THE SOCIETY. SUCH A RESULTANT SOCIETY WITH A M IX OF THE MEMBERS AS WELL AS NON MEMBERS CONTRIBUTING TO THE KITTY AND SIMULTANEOUSLY ENJOYING THE SERVICES IN SPITE O F BEING NON MEMBERS CANNOT BE HELD TO BE FALLING WITHIN THE FOUR COMERS OF THE PRINCIPLE OF MUTUALITY. THEREFORE, TO THE EXTENT THAT SUCH CONTRIBUTIONS HAVE BEEN GENERATED FROM TH E NON MEMBERS AS DISCUSSED BY THE AO DID NOT QUALIFY TO A VAIL THE BENEFIT OF PRINCIPLE OF MUTUALITY. THEREFORE, IT IS HELD THAT THE PRINCIPLE OF MUTUALITY DOES NOT APPLY AND THE RECEI PT OF ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 10 RS.20,94, 130/- ADDED BY THE AO DESERVES TO BE UPHE LD. 5. SIMILARLY IN THE AY 2007-08 THE LD. CIT(A) FOLLO WING HIS ORDER FOR THE A.Y. 2004-05 DELETED THE ADDITION OF ` 13,98,508/- ON ACCOUNT OF INTEREST. AS REGARDS RECEIPTS FROM MEMBERS AND NON -MEMBERS TOWARDS MAINTENANCE CHARGES, THE LD. CIT(A) WHILE FOLLOWING THE DECISION DATED 31.12.2008 IN THE CASE OF M/S HERITAGE RESIDENT WEL FARE ASSOCIATION VS. ITO,19 DTR 108 (DEL.) DELETED THE ENTIRE ADDITION. 6. THE REVENUE IS NOW IN APPEAL BEFORE US, AGAINST THE DELETION OF ADDITION OF INTEREST IN THESE TWO ASSESSMENT YEARS BESIDES DELETION OF ADDITION OF ` 8,73,709/- IN THE AY 2004-05 AND 38,91,961 IN THE AY 2007- 08 WHILE THE ASSESSEE IS IN APPEAL AGAINST UPHOLDIN G OF THE ADDITION OF ` 20,94,130/- IN A.Y. 2004-05. IN THE CO FOR THE AY 2007-08, THE ASSESSEE PLEADED ,WITHOUT PREJUDICE TO THEIR CLAIM OF PRINCIPLE OF MUTUALITY ,THAT THE AO COULD, AT THE MOST, TAX NET RECEIPTS AND NOT THE GROSS RECEIPTS COLLECTED FOR MAINTENANCE AND UPKEEP OF THE BUILDING. THE LD. DR WHILE CARRYING US THROUGH THE IMPUGNED ORDER RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN M/S PRA BHA SHANKAR PLAZA VS. ITO ;2010-TIOL-243-HC-KAR-IT AND CONTENDED THAT PRINCIPLE OF MUTUALITY IS NOT APPLICABLE TO INTEREST RECEIVED ON INVESTMENT OF SURPLUS FUNDS OR RECEIPTS FROM MEMBERS AND THEIR TENANTS ESPECIALLY WHEN THE LD. CIT(A) UPHELD THE ADDITION IN A.Y. 2004-05 IN R ELATION TO RECEIPT FROM NON-MEMBERS. INTER ALIA, THE LD. DR RELIED UPON T HE DECISION IN SPORTS CLUB OF GUJARAT LIMITED. VS. CIT,171 ITR 504 (GUJ.) , RAJPATH CLUB LIMITED.VS. CIT,211 ITR 379 (GUJ.), HARYANA STATE C O-OPERATIVE LABOUR AND CONSTRUCTION FEDERATION LTD.VS. CIT,252 ITR 265 (P&H), .CIT VS. I T. I. EMPLOYEES DEATH AND SUPERANNUATION RELIEF FUN D.234 ITR 308 (KAR.). 6.1. ON THE OTHER HAND, LD. AR ON BEHALF OF THE ASS ESSEE WHILE REFERRING TO DECISION OF THE LD. CIT(A) IN A.Y. 20 07-08 RELIED UPON THE DECISION OF ITAT DELHI BENCH IN HERITAGE CITY RESID ENTS WELFARE ASSOCIATION VS. ITO, 19 DTR (DEL.) 108 ,DECISION DA TED 16.10.09 IN THE ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 11 CASE OF WELLINGTON ESTATE CONDOMINIUM ASSOCIATION IN ITA NO. 2846/DEL/07 FOR THE A.Y. 2003-04,AND DECISION OF H ONBLE DELHI HIGH COURT IN CIT VS. STANDING CONFERENCE OF PUBLIC ENTE RPRISES, 319 ITR 179. THE LD. AR ADDED THAT SLP FILED BY THE REVENU E AGAINST THE DECISION OF HONBLE DELHI HIGH COURT IN STANDING CO NFERENCE OF PUBLIC ENTERPRISES(SUPRA) HAS BEEN DISMISSED. BY THE HONB LE SC VIDE THEIR JUDGMENT DATED 7THJULY, 2010. 7.. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AND THE AFORESAID DECISIONS CITED BY BOTH THE PARTIES. THE ISSUE BEFORE US IN THESE APPEALS IS WHETHER OR NOT RECE IPTS ON ACCOUNT INTEREST AND FROM MEMBERS AS ALSO NON-MEMBERS OF T HE AFORESAID SOCIETY ARISE FROM MUTUAL ACTIVITIES OF THE MEMBERS OF THE SOCIETY. THE SAID SOCIETY WAS REGISTERED ON 28 TH AUGUST,1998 FOR THE CARE AND MAINTENANCE OF THE PROPERTY AT SURYA KIRAN BUILDIN G AT KASTURBA GANDHI MARG,NEW DELHI AND LAY DOWN REQUIREMENTS FOR THE OW NERS OF THE FLATS IN THE BUILDING TO CONSERVE AND PROTECT THE PROPERTY A ND PROVIDE COMMON SERVICES APART FROM PROVIDING SECURITY AND PROMOTE ALL SUCH ACTIVITIES AS ARE CONDUCIVE TO THE GENERAL WELFARE OF THE MEMBERS . EVERY OWNER OF THE FLAT OR HIS NOMINEE IS MEMBER OF THE SOCIETY AND WA S REQUIRED TO PAY ` 500/- BY WAY OF ADMISSION FEE BESIDES MONTHLY SUBSC RIPTION. THE RECEIPTS FROM MEMBERS TOWARDS MAINTENANCE CHARGES WERE UTILIZED FOR PROVIDING CLEANLINESS, WATER ,ELECTRICITY, SECURITY , FIRE FIGHTING, SAFETY MEASURES ETC. AS PER CLAUSE 13 OF THE RULES AND REG ULATIONS OF THE SOCIETY, ON DISSOLUTION OF THE SOCIETY, SURPLUS WAS NOT TO BE DISTRIBUTED AMONGST MEMBERS BUT WOULD BE GIVEN TO A SOCIETY AS AGREED UPON BY AT LEAST 3/5 TH OF THE MEMBERS PRESENT AT THE TIME OF DISSOLUTION. CLAUSE 14 OF THE RULES AND REGULATIONS SPECIFIED THAT EVEN IF THE FLAT IS RENTED OUT, OWNER SHALL BE RESPONSIBLE TO GET THE OCCUPIER DUE S PAID TO THE SOCIETY. AS PER CLAUSE 15 OF THE BUYERS AGREEMENT , THE BUY ER WAS REQUIRED TO PAY HIS SHARE TOWARDS COSTS, EXPENSES AND OUTGOINGS AND ANY OTHER TAXES ETC. THE FIRST ISSUE BEFORE IS AS TO WHETHER INTEREST EARNED BY THE SOCIETY ON BANK FIXED DEPOSITS, SAVINGS BANK A/C E TC. WITH THE INVESTMENT OF SURPLUS FUNDS OUT OF CONTRIBUTION BY MEMBERS OF THE ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 12 SOCIETY IS COVERED BY THE PRINCIPLES OF MUTUALITY. THE AO WHILE RELYING ON CERTAIN DECISIONS CONCLUDED THAT INTEREST SO RE CEIVED FROM NON MEMBERS WAS NOT COVERED BY THE PRINCIPLES OF MUTUA LITY WHILE THE LD. CIT(A) FOLLOWING DECISIONS OF JURISDICTIONAL HIGH C OURT HELD OTHERWISE. BEFORE PROCEEDING FURTHER, WE MAY REFER TO CERTAIN DECISIONS IN THE CASE OF SOCIETIES, WHEREIN SIMILAR ISSUE OF APPLICABILIT Y OF PRINCIPLE OF MUTUALITY WAS INVOLVED. IN C.I.T. VERSUS APSARA COOP. HOUSING SOCIETY LTD. 204 ITR 662(CAL), THE ASSESSEE WAS A COOPERATIVE HOUSIN G SOCIETY WHICH PROVIDED RESIDENTIAL PREMISES TO THE MEMBERS OF THE SOCIETY WHICH RECEIVED TRANSFER FEES FOR TRANSFER OF FLATS. THE A O HELD THAT THE RECEIPT WAS TAXABLE AS INCOME. THE HONBLE CALCUTTA HIGH CO URT WHILE RELYING ON THE JUDGMENT IN BANKIPUR CLUB LTD. (SUPRA) AND OTHE R JUDGMENTS NOTED THAT THE PRINCIPLES APPLICABLE TO THE MEMBERS OF TH E CLUB WERE EQUALLY APPLICABLE TO THE CO-OPERATIVE HOUSING SOCIETY, PAR TICULARLY HOUSING COOPERATIVE SOCIETY WHICH DOES NOT CARRY ON ANY BUS INESS AND WHERE NO ELEMENT OF PROFIT IS INVOLVED. THE ASSESSEE COOPERA TIVE HOUSING SOCIETY WAS A MUTUAL CONCERN, THE COURT HELD AND THAT THE TRANSFER FEE RECEIVED BY THE SOCIETY FOR TRANSFER OF FLAT WAS NOT TAXABLE INCOME OF THE ASSESEE. 7.1 . IN C.I.T. VS. ADARSH COOPERATIVE HOUSING SO CIETY LTD. ,213 ITR 677 (GUJ), THE ISSUE WAS AS TO WHETHER ON TRANSFE R OF LEASE, THE AMOUNT RECEIVED BY THE SOCIETY FROM THE MEMBER OUT OF THE PREMIUM RECEIVED BY HIM FROM THE PURCHASER WAS EXIGIBLE TO TAX. AFTER C ONSIDERING THE PROVISIONS OF THE GUJARAT COOPERATIVE SOCIETIES ACT , 1961, THE HONBLE GUJARAT HIGH COURT NOTED THAT THE CORPUS OF FUND WA S NOT DIVISIBLE AS SUCH PRO RATA BETWEEN THE MEMBERS ON THE WINDING UP OF THE SOCIETY. HOWEVER, SUCH SURPLUS WAS TO BE DEVOTED TO ANY OBJE CT OR OBJECTS PROVIDED IN THE BYLAWS OF THE SOCIETY IF THEY SPECI FY THAT SUCH A SURPLUS SHALL BE UTILIZED FOR PARTICULAR PURPOSE. THE HONB LE HIGH COURT THEREFORE, HELD THAT THE RIGHT OF THE MEMBERS TO DEAL WITH THE SURPLUS WAS NOT DESTROYED AND THAT DID NOT DETRACT FROM THE CONCEPT OF RETURN OF SURPLUS TO MEMBERS WHICH THEY HAD CONTRIBUTED. THERE WAS ID ENTITY OF CONTRIBUTORS AND BENEFICIARIES. IT WAS ALSO CONCLUD ED THAT IT IS NOT NECESSARY THAT THE PARTICIPANTS OF THE SURPLUS NEED BE THE SAME ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 13 INDIVIDUALS WHO HAVE CONTRIBUTED BUT THEY MUST BEAR THE SAME CHARACTER, NAMELY, CONTRIBUTOR MEMBER. 7.2. IN THE INSTANT CASE, THERE IS NOTHING TO SU GGEST THAT THE SOCIETY CARRY ON ANY BUSINESS NOR ANY ELEMENT OF PROFIT I S INVOLVED.IN THE LIGHT OF AFORESAID PRINCIPLES, THE QUESTION IS WHETHER ON T HE FACTS BEFORE US, THE PRINCIPLE OF MUTUALITY WOULD BE ATTRACTED IN RESPEC T OF THE INTEREST INCOME OR RECEIPTS FROM MEMBERS OR TENANTS OF THE M EMBERS. ON ANALYZING THE VARIOUS TESTS WHICH ARE TO BE CONSI DERED FOR APPLYING THE PRINCIPLE OF MUTUALITY TO A CASE OF A SOCIETY , WHI CH DOES NOT CARRY ON ANY BUSINESS AND WHERE NO ELEMENT OF PROFIT IS INVOLVED ,WE HAVE TO LOOK AS TO WHETHER ANY COMMERCIALITY IS INVOLVED. THIS HA S TO BE FOUND FROM THE BYELAWS OF THE SOCIETY. AS IS APPARENT FROM THE ME MORANDUM OF ASSOCIATION AND BYELAWS OF THE SOCIETY BEFORE US , OBJECT OF THE SOCIETY IS TO PROVIDE VARIOUS FACILITIES AND SERVICES TOW ARDS MAINTENANCE AND USE OF THE BUILDING TO THE OWNERS/OCCUPIERS. THER E CANNOT BE ANY COMMERCIALITY INVOLVED. ONCE THERE IS NO COMMERCIAL ITY , IT CAN BE INFERRED THAT THE PROFITABILITY DOES NOT EXIST. FRO M THE MONEYS RECEIVED ARE THE SERVICES OFFERED IN THE NATURE OF SHARING OF PRIVILEGES, ADVANTAGES AND CONVENIENCES. IN CASE OF A HOUSING MAINTENANCE SOCIETY, THE ONLY ACTIVITIES WHICH IT CAN CARRY OUT IN TERMS OF ITS BYE-LAWS ARE BASICALLY MAINTENANCE OF ITS PROPERTY. THE SUBS CRIPTION AND/OR CONTRIBUTIONS RECEIVED FROM THE MEMBERS CAN ONLY BE EXPENDED FOR THE PURPOSES OF MAINTENANCE AND PROVIDING OTHER PRIVILE GES, ADVANTAGES AND \CONVENIENCES TO ITS MEMBERS IN TERMS OF ITS BYE-LA WS. THE CLASS OF MEMBERS ARE CLEARLY IDENTIFIABLE. MEMBERS ARE ORDIN ARY MEMBERS OR ASSOCIATE MEMBERS. THE PARTICIPANTS AND CONTRIBUTOR S ARE THE MEMBERS. THE MEMBERS MAY COME IN OR GO OUT. THE FACT THAT ON LY SOME MEMBERS FROM THOSE WHO CONTRIBUTED MAY PARTICIPATE IN THE S URPLUS, IS IRRELEVANT AS LONG AS THE CLASS IS IDENTIFIABLE. IN TERMS OF T HE BYE LAWS, THE SURPLUS CAN ONLY BE DEALT WITH IN THE MANNER PROVIDED THERE IN OR BE TRANSFERRED TO ANOTHER SOCIETY WITH SIMILAR OBJECT. IN THE INS TANT CASE, INTEREST INCOME HAS BEEN EARNED FROM FIXED DEPOSITS AND FUND S AVAILABLE IN SAVINGS BANK ACCOUNT OUT OF CONTRIBUTIONS RECEIVED FROM MEMBERS/OCCUPIERS. THE RESERVATION OF THE REVENUE IS THAT THE ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 14 TRANSACTION WITH NON-MEMBERS SHOULD NOT MERIT EXEM PTION BECAUSE OF LACK OF MUTUALITY. BUT THE HONBLE SUPREME COURT I N BANKIPUR CLUB LTD.S CASE (SUPRA) DID NOT ACCEPT THIS AS LONG AS SUCH IN COME IS FROM ACTIVITY NOT TAINTED WITH COMMERCIALITY, QUOTING WITH APP ROVAL, THE HEAD NOTE SUMMARISING THE DECISION OF THE FULL BENCH OF PATNA HIGH COURT IN CIT V. RANCHI CLUB LTD.(1992) 196 ITR 137 (PATNA) (FB) IN FOLLOWING WORDS: ... THAT MERELY BECAUSE THE ASSESSEE-COMPANY HAD ENTERED INTO TRANSACTIONS WITH NON-MEMBERS AND EARNED PROFITS OU T OF TRANSACTIONS HELD WITH THEM, ITS RIGHT TO CLAIM EXEMPTION ON THE PRIN CIPLE OF MUTUALITY IN RESPECT OF TRANSACTIONS HELD BY IT WITH ITS MEMBERS WAS NOT LOST. THE ASSESSEE WAS A MUTUAL CONCERN. THE INCOME DERIVED BY IT FROM ITS HOUSE PROPERTY LET TO ITS MEMBERS AND THEIR GUESTS AND FROM THE SALE OF LIQUO R,ETC., TO ITS MEMBERS AND THEIR GUESTS WAS NOT TAXABLE IN ITS HANDS. 7.3 COMING NOW TO THE ISSUE OF APPLICABILITY OF PRI NCIPLE OF MUTUALITY THE INTEREST INCOME, WE FIND THAT THE LD. CIT(A) AC CEPTED THE CLAIM OF THE ASSESSEE IN THE LIGHT OF VIEW TAKEN THE DECISION IN SHIVALIKA COOPERATIVE GROUP HOUSING SOCIETY LTD. (SUPRA),WHERE IN IT WAS HELD THAT INTEREST INCOME EARNED BY AN ASSESSEE ON SURP LUS FUNDS OF A MUTUAL SOCIETY DEPOSITED WITH A BANKING INSTITUTION ARE COVERED BY THE PRINCIPLE OF MUTUALITY, AS HELD BY HON'BLE DELHI HI GH COURT IN THEIR JUDGMENT IN THE CASE OF DIT V. ALL INDIA ORIENTAL B ANK OF COMMERCE WELFARE SOCIETY [2003] 184 CTR (DELHI) 274. IN TAKI NG THIS VIEW, THE HONBLE DELHI HIGH COURT TOOK A CUE FROM THE DECISI ON OF THE HONBLE SUPREME COURT IN CHELMSFORD CLUB V. CIT, 243 ITR 89, WHERE THE HONBLE SUPREME COURT HAD LAID DOWN THE PRINCIPLE T HAT WHERE A NUMBER OF PERSONS COMBINE TOGETHER TO A COMMON FUND FOR FI NANCING OF SOME VENTURE OR OBJECT AND IN THIS RESPECT HAVE NO DEALI NGS OR RELATIONS WITH ANY OUTSIDE BODY, THEN ANY SURPLUS GENERATED CANNOT IN ANY SENSE BE REGARDED AS PROFITS CHARGEABLE TO TAX.THE DECISION OF HONBLE DELHI HIGH COURT IN ALL INDIA ORIENTAL BANK OF COMMERCE WELFAR E SOCIETY (SUPRA) WAS FOLLOWED BY THE HONBLE JURISDICTIONAL HIGH COU RT IN THEIR DECISION DATED 11.5.2007 IN THE CASE OF COUNTRY CLUB . HON BLE KARNATAKA HIGH COURT IN THE CASE OF CANARA BANK GOLDEN JUBILEE STA FF WELFARE FUND V. DY. CIT, 308 ITR 202 (KAR.) HELD THAT . 2.8 TAKING INTO CONSIDERATION THE OBJECTS OF THE A SSESSEE, THE SOURCE OF FUNDS DURING THE RELEVANT YEARS AND THE APPLICABILI TY OF THE FUNDS FOR THE ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 15 BENEFIT OF ITS MEMBERS, AND KEEPING IN MIND THE INT EREST ON INVESTMENTS AND DIVIDEND EARNED ON SHARES WAS ONLY A SMALL PORT ION OF THE TOTAL EARNED BY INVESTMENT OF THE SURPLUS FUNDS WHOLLY CO NTRIBUTED BY THE MEMBERS OF THE ASSESSEE, THE KARNATAKA HIGH COURT H ELD THAT THE INTEREST EARNED ON INVESTMENT AND DIVIDEND RECEIVED ON SHARES WAS DEEMED INCOME FROM THE PROPERTY OF THE ASSESSEE CON TRIBUTED BY ITS MEMBERS, AND WAS GOVERNED BY THE PRINCIPLE OF MUTUA LITY AND WAS THEREFORE EXEMPT. 7.4 IN THE CASE OF SCOPE(SUPRA), THE AO DECLINED TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT PRINCIPLE OF MUTUAL ITY WAS APPLICABLE ,INTER ALIA, TO INTEREST INCOME. THE TRIBUNAL HOWE VER, ACCEPTED THAT PRINCIPLE OF MUTUALITY WOULD APPLY. ON APPEAL BY T HE REVENUE REGARDING APPLICABILITY OF PRINCIPLE OF MUTUALITY TO RECEIPT FROM MEMBERS AND INTEREST EARNED FROM SURPLUS FUNDS DEPOSITED WITH THE BANKS, THE HONBLE JURISDICTIONAL HIGH COURT FOLLOWING THE VIEW TAKEN IN BANKIPUR CLUB LTD. (SUPRA) ,CHELMSFORD CLUB VS. CIT,243 ITR 89 (SC) AN D DALHOUSIE INSTITUTE VS. AC, SERVICE TAX 3 STR 311 (CAL.) REJECTED THE APPEAL OF THE REVENUE. THE HONBLE SC ALSO DISMISSED THE SLP FIL ED BY THE DEPARTMENT ON 7.7.2010. THE DECISION IN SCOPE(SU PRA) WAS FOLLOWED BY A CO-ORDINATE BENCH IN ANOTHER DECISION DATED 1 6.10.2009 IN WELLINGTON ESTATE CONDOMINIUM (SUPRA). 7.5 IN THE LIGHT OF VIEW TAKEN BY THE HONBLE JU RISDICTIONAL HIGH COURT IN THEIR AFORESAID DECISION IN THE CASE OF DIT(E) V. ALL INDIA ORIENTAL BANK OF COMMERCE WELFARE SOCIETY, 130 TAXMAN 575, FOLLOW ED IN SUBSEQUENT DECISIONS MENTIONED ABOVE, WE HAVE NO AL TERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A),CONCLUDING TH AT THE PRINCIPLE OF MUTUALITY APPLIES TO INTEREST INCOME DERIVED BY A C O-OPERATIVE SOCIETY FROM DEPOSITS MADE OUT OF CONTRIBUTIONS MADE BY MEM BERS OF THE SOCIETY. THEREFORE, GROUND RAISED BY THE REVENUE IN THESE TWO ASSESSMENT YEARS IN RELATION TO APPLICABILITY OF P RINCIPLE OF MUTUALITY TO INTEREST INCOME IS DISMISSED. 8. AS REGARDS CONTRIBUTIONS BY MEMBERS AND THE TEN ANTS OF THE MEMBERS OF THE SOCIETY, THE ITAT IN THE CASE OF HER ITAGE CITY RESIDENTS WELFARE ASSOCIATION (SUPRA) WHILE ADJUDICATING THE APPLICABILITY OF ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 16 PRINCIPLE OF MUTUALITY TO INTEREST INCOME AND RECEI PT FROM NON-MEMBERS I.E. TENANTS CONCLUDED AS UNDER: - 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBS ERVED THAT THE PRINCIPLE OF MUTUALITY HAS BEEN HELD TO BE NOT APPLICABLE IN THE CASE OF THE ASSESSEE BY THE AUTHO RITIES BELOW MAINLY FOR THE REASONS THAT THE CONTRIBUTION WAS RECEIVED BY IT ALSO FROM THE TENANTS WHO WERE NON- MEMBERS AND EVEN THE INTEREST INCOME AND MISCELLANE OUS INCOME WAS RECEIVED BY THE ASSESSEE FROM THE OUTSID ERS. A REFERENCE WAS ALSO MADE TO THE RELEVANT CLAUSES O F THE MEMORANDUM OF ASSOCIATION TO ALLEGE THAT THE SAID CLAUSES PERMITTING THE ASSESSEE TO INVEST THE EXCES S FUNDS IN BANKS AND ALSO TO LET OUT THE VACANT COMMO N AREA WERE TAINTED WITH COMMERCIALITY. 12. INSOFAR AS THE CONTRIBUTION RECEIVED FROM THE T ENANTS IS CONCERNED. WE FIND OURSELVES IN AGREEMENT WITH THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAID CONTRIBUTION WAS ACTUALLY PAID BY THE TENANTS TO THE ASSESSEE ON BEH ALF OF OWNERS OF THE FLATS WHO WERE ITS MEMBERS. THE SAME , THEREFORE, CANNOT BE REGARDED AS RECEIVED FROM THE OUTSIDERS IN REAL SENSE. MOREOVER, THE TENANTS OCC UPYING THE FLATS IN THE SOCIETY WERE GETTING BENEFITED FRO M THE EXPENDITURE INCURRED ON MAINTENANCE ETC. FROM THE CONTRIBUTION COLLECTED BY THE ASSESSEE SOCIETY AND IN THIS WAY THEY WERE PARTICIPANTS IN THE BENEFITS THEREBY FORMING PART OF CLASS OF PARTICPATORS. AS HELD BY THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. DARJEELI NG CLUB LTD. (SUPRA) IDENTITY BETWEEN THE CONTRIBUTORS AND PARTICIPATORS HAS TO BE SEEN AS A CLASS AND NOT AS INDIVIDUALS. THE TEST OF MUTUALITY AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CHELMSFORD CLU B (SUPRA) THUS WAS FULLY SATISFIED IN THE CASE OF THE ASSESSEE AND THERE WAS NO REASON TO DENY THE BENEFIT OF MUTU ALITY. 13. AS REGARDS THE MISCELLANEOUS INCOME RECEIVED BY THE ASSESSEE FROM BHARTI TELENET LTD., IT IS OBSERVED T HAT THE SAME WAS ON ACCOUNT OF RECOVERY OF THE ACTUAL DAMAG E CAUSED TO THE SOCIETY AS A RESULT OF LAYING DOWN OF TELEPHONE CABLES OF THE SAID PARTY IN ITS COMPLEX. THE SAID AMOUNT THUS WAS NOT IN THE NATURE OF INCOME AN D AS THE ASSESSEE SOCIETY HAD ACTUALLY SUFFERED A LOSS A S A RESULT OF LESS RECOVERY MADE FROM M/S BHARTI TELENE T LTD. THAN THE ACTUAL AMOUNT SPENT BY IT ON THIS ACCOUNT, THERE WAS NO REASON TO DENY THE BENEFIT OF MUTUALITY TO I T ON THIS BASIS. EVEN THE INTEREST INCOME WAS RECEIVED BY TH E ASSESSEE SOCIETY ON THE SURPLUS FUNDS INVESTED WITH THE BANK AS AUTHORIZED BY ITS MEMORANDUM OF ASSOCIATION AND AS HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF IT (EXEMPTIONS) VS. ALL INDIA ORIENTAL BANK OF ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 17 COMMERCE WELFARE SOCIETY (SUPRA) RELYING ON THE DEC ISION OF HONBLE SC IN THE CASE OF CHELMSFORD CLUB VS. CI T (SUPRA), THE PRINCIPLE OF MUTUALITY WAS APPLICABLE TO SUCH INCOME. 14. AS REGARDS THE REGARDS THE RELEVANT CLAUSES OF MEMORANDUM OF ASSOCIATION REFERRED TO BY THE AUTHOR ITIES BELOW PERMITTING THE ASSESSEE SOCIETY TO INVEST MON EY AND TO RETAIN AND RENT OR LICENSE SUITABLE PORTION OF THE COMMON AREAS TO OUTSIDERS FOR COMMERCIAL PURPOSES, WHICH ARE HELD TO BE TAINTED WITH COMMERCIALITY, IT IS OBSERVED THAT NO SUCH ACTIVITY WAS ACTUALLY CARRIED ON BY THE ASSESSEE SOCIETY DURING THE YEAR UNDER CONSIDER ATION AND THIS BEING SO, WE ARE OF THE VIEW THAT THE BENE FIT OF MUTUALITY CANNOT BE DENIED TO IT MERELY ON THE BASI S OF SOME ACTIVITIES PERMITTED BY THE MEMORANDUM OF ASSOCIATION WHICH HAD NOT BEEN ACTUALLY CARRIED ON DURING THE YEAR UNDER CONSIDERATION. AS SUCH CONSIDERING ALL THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE PRIN CIPLE OF MUTUALITY WAS APPLICABLE IN THE CASE OF THE ASSESSE E AND THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN DENYING THE ASSESSEE THE BENEFIT CLAIMED ON THE BASIS OF THE SAID PRINCIPLE. HIS IMPUGNED ORDER IS , THEREFORE, SET ASIDE AND THE AO IS DIRECTED TO ALLO W THE BENEFIT CLAIMED BY THE ASSESSEE SOCIETY ON THE BASI S OF PRINCIPLE OF MUTUALITY. 8.1 SIMILARLY, THE ITAT DELHI BENCH IN ANOTHER D ECISION DATED 16.10.2009 IN WELLINGTON ESTATE CONDOMINIUM (SUPRA) WHILE EXAMINING THE APPLICABILITY OF PRINCIPLES OF MUTUALITY TO INT EREST INCOME AND RECEIPTS FROM TENANTS I.E. NON-MEMBERS CONCLUDED AS UNDER: - 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE G ONE THROUGH THE MATERIAL AVAILABLE ON RECORD AND HAVE G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE TRIBUNAL DECISION CITED BY THE LD. AR OF THE ASSESS EE. WE FIND THAT CLAUSE NO. 18(B) OF THE BYE LAWS OF THE A SSESSEE IS REGARDING WINDING UP OR DISSOLUTION OF THE SOCIE TY, AS PER WHICH, ANY SURPLUS REMAINING AFTER SATISFACTION OF ITS DEBTS AND LIABILITIES, SHALL NOT BE PAID TO OR DIST RIBUTED AMONG THE MEMBERS OF THE SOCIETY BUT SHALL BE GIVEN OR TRANSFERRED TO SOME OTHER INSTITUTION HAVING OBJECT S SIMILAR TO THE OBJECTS OF THE SOCIETY TO BE DETERMINED BY T HE MEMBERS OF SOCIETY AT THE TIME OF DISSOLUTION. WE FIND THAT THIS CLAUSE IS SIMILAR TO CLAUSE NO. (XXIV) RE FERRED TO BY THE TRIBUNAL IN THE CASE OF SCOPE (SUPRA). THIS AS PECT OF THE MATTER HAS BEEN DECIDED BY THE TRIBUNAL IN FAVO UR OF THE ASSESSEE IN THAT CASE BY FOLLOWING THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF BANKIPUR CLUB (SUPRA) AND HENCE FOR THIS REASON, IN THE PRESENT C ASE ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 18 ALSO, WE ARE OF THE CONSIDERED OPINION THAT THE CLA IM OF THE ASSESSEE REGARDING MUTUALITY CANNOT BE REJECTED ON THE BASIS OF THIS CLAUSE IN THE BYE LAWS. REGARDING OT HER REASONING GIVEN BY LD. CIT(A) THAT THERE IS NO IDEN TITY BETWEEN THE CONTRIBUTORS AND PARTICIPATORS IN VIEW OF CLAUSE 2 &4 OF THE BYE LAWS AS PER WHICH THE ASSESS EE COULD INVEST OR DEPOSIT MONEY AND COULD LET OUT SUI TABLE PORTION OF COMMON AREAS TO OUTSIDERS FOR COMMERCIAL PURPOSES AND TO ACCUMULATE THE COMMON PROFIT FOR BUILDING UP RESERVE FUND. THIS ASPECT HAS ALSO BEE N DEALT BY THE TRIBUNAL IN THE CASE OF SCOPE (SUPRA). IN T HAT CASE ALSO, INTEREST INCOME WAS EARNED FROM SURPLUS FUNDS AND RENTAL INCOME WAS RECEIVED FROM NON MEMBERS ALS O. REGARDING INTEREST INCOME, IT WAS HELD BY THE TRIBU NAL THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN TH E CASE OF ALL INDIA ORIENTAL BANKING COMMERCE OF WELF ARE SOCIETY REPORTED 184 CTR 274 IN WHICH IT HAS BEEN H ELD THAT PRINCIPLE OF MUTUALITY APPLIES TO INTEREST INC OME RECEIVED FROM THE DEPOSITS MADE OUT OF CONTRIBUTION BY THE MEMBERS. REGARDING RENTAL INCOME FROM NON MEMBERS, IT WAS HELD THAT SUCH INCOME IS NOT ENTITLED FOR EXEMP TION AS PER THE JUDGMENT OF HONBLE KERALA HIGH COURT IN TH E CASE OF TRIVENDRAM CLUB (2006-TIOL-130) AND IT WAS HELD THAT RENTAL INCOME FROM NON MEMBERS COULD BE TAXABLE BUT ONLY AFTER EXCLUDING THE EXPENSES INCURRED IN RELAT ION TO EARNING OF THE SAID RENTAL INCOME. HENCE, WE FIND THAT FOR THIS REASON ALSO, IT WAS NOT HELD THAT THE ASSESSEE SOCIETY IS NOT A MUTUAL CONCERN AND ONLY RENTAL INCOME WAS DIRECTED TO BE TAXED. IN THE PRESENT CASE, WE FIND THAT THERE IS NO RENTAL INCOME RECEIVED BY THE ASSESSEE BECAUSE WE FIND THAT AS PER THE INCOME AND EXPENDIT URE ACCOUNT APPEARING ON PAGE NO. 4 OF THE PAPER BOOK, THERE IS NO RENTAL INCOME RECEIVED BY THE ASSESSEE. REGA RDING THIS ALLEGATION THAT WHEN THE FLATS ARE RENTED OUT, MAINTENANCE CHARGES ARE RECEIVED BY THE ASSESSEE FR OM NON MEMBERS, WE ARE OF THE CONSIDERED OPINION THAT THE LIABILITY OF PAYMENT OF MAINTENANCE AND OTHER CHARG ES IS OF THE MEMBER I.E. THE OWNER AND EVEN IF THE SAME IS P AID TO THE SOCIETY BY THE TENANT OF THE MEMBERS, IT CANNOT BE SAID THAT THE SOCIETY IS RECEIVING THE SAME FROM NO N MEMBERS BECAUSE IN CASE OF DEFAULT, THE ASSESSMENT CAN COLLECT THE SAME FROM MEMBERS ONLY AND NOT FROM THE TENANTS. AS PER CLAUSE 4(B) OF THE BYE LAWS ALL THE OWNERS ARE OBLIGED TO PAY MONTHLY ASSESSMENT IMPOSED BY TH E ASSOCIATION TO MEET ALL EXPENSES RELATING TO WELLIN GTON ESTATE CONDOMINIUM WHICH MAY INCLUDE AN INSURANCE PREMIUM FOR A POLICY TO RECOVER REPAIR AND RECONSTR UCTION WORK IN CERTAIN CASES. WE ARE OF THE CONSIDERED OP INION THAT EVEN IF SUCH PAYMENTS ARE MADE BY THE TENANTS OF THE MEMBERS, IT HAS TO BE CONSIDERED AS RECEIVED FROM T HE ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 19 MEMBERS BECAUSE IT IS A LIABILITY OF THE MEMBER TO PAY SUCH AMOUNTS TO THE ASSESSEE ASSOCIATION AND EVEN I F THE SAME IS PAID BY THE TENANTS, THE TENANTS ARE PAYING ONLY ON BEHALF OF THE MEMBERS OF SOCIETY. WE FEEL THAT FOR THIS REASON, IT CANNOT BE HELD THAT THE ASSESSEE IS NOT A MUTUAL CONCERN. UNDER THESE FACTS, WE FEEL THAT THE ASSES SEE HAS TO BE ASSESSED AS MUTUAL CONCERN AND HENCE THE RECEIPTS FROM MEMBERS CANNOT BE ASSESSED AS INCOME IN THE HANDS OF THE ASSESSEE. INCOME FROM INTEREST ON FIXED DEPOSIT WITH BANK OF RS. 26,182/- IS ALREADY OFFERE D TO TAX BY THE ASSESSEE AS PER THE COMPUTATION OF INCOME AVAILABLE ON PAGE NO. 2 OF THE PAPER BOOK. HENCE, WE DELETE THE ADDITION MADE BY THE AO AND DIRECT THE A O TO ASSESS THE INCOME OF THE ASSESSEE AS PER RETURN OF INCOME FILED BY THE ASSESSEE. 8.2. AS REGARDS DECISION RELIED UPON BY THE LD. DR IN THE CASE OF PRABHASHANKAR PLAZA, IN THAT CASE THE ASSESSEE , A PARTNERSHIP FIRM CARRIED ON THE BUSINESS AS PROPERTY DEVELOPERS, TR ADERS IN GENERAL MERCHANDISE AND COMMISSION AGENTS. THE FIRM POOLED THEIR RESOURCES FROM ALL THE PARTNERS. A BUILDING OWNED BY THE FIR M WAS RENTED TO PARTNERS AND RENTAL INCOME WAS CLAIMED EXEMPT ON TH E PRINCIPLES OF MUTUALITY. HOWEVER, THE ITAT AND SUBSEQUENTLY THE HONBLE HIGH COURT ON THESE FACTS ,AFTER PERUSING THE AGREEMENTS CONCL UDED THAT FUNDS OF THE FIRM BEING AVAILABLE TO OUTSIDERS, THE ASSESSE E FIRM WAS NOT GOVERNED BY THE PRINCIPLE OF MUTUALITY. APPARENTLY , THE SAID DECISION WAS RENDERED ON ALTOGETHER DIFFERENT FACTS AND IS T HUS, NOT APPLICABLE TO THE FACTS OF THE INSTANT CASES. 8.3 IN THE INSTANT CASE , THE LD. CIT(A) HAS AL LOWED THE CLAIM OF THE ASSESSEE IN THE AY 2007-08 FOR APPLICATION OF PRIN CIPLE OF MUTUALITY TO RECEIPTS FROM MEMBERS AND NON-MEMBERS I.E TENANTS O F THE MEMBERS, FOLLOWING THE AFORESAID DECISION IN HERITAGE CITY R ESIDENTS WELFARE ASSOCIATION (SUPRA) . AS PER CLAUSE 14 OF THE RULES AND REGULATIONS, EVEN IF THE FLAT IS RENTED OUT, OWNER MEMBER IS R ESPONSIBLE TO GET THE OCCUPIER DUES PAID TO THE SOCIETY. IN VIEW OF THE FOREGOING, ESPECIALLY WHEN IDENTITY BETWEEN THE CONTRIBUTORS AND PARTICIP ATORS HAS TO BE SEEN AS A CLASS AND NOT AS INDIVIDUALS, IN THE LIGHT OF VIEW TAKEN, IN HERITAGE CITY RESIDENTS WELFARE ASSOCIATION (SUPRA) ,. WELLI NGTON ESTATE ITA NOS.2728 & 2837/D/08 & 4379/D/10 & CO NO. 381/D/11 20 CONDOMINIUM (SUPRA); AND SCOPE(SUPRA), WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A) IN THE AY 2007-08 AND REJECT THE APPEAL OF THE REVENUE IN THE AY 2004-05 IN RELATION TO RECEIPTS FROM MEMBERS WHILE ALLOWING GROUND NO.1 RAISED IN THE APPEAL OF THE ASSESSEE IN THE AY 2004-05 IN RESPECT OF RECEIPTS F ROM NON-MEMBERS . 9. AS A COROLLARY , GROUND NO.2 IN THE APPEAL OF THE ASSESSEE IN THE AY 2004-05 AS ALSO GROUND RAISED IN CO FOR THE AY 2007 -08 DO NOT SURVIVE FOR OUR ADJUDICATION AND ARE THEREFORE, DISMISSED. EVEN OTHERWISE, THE LD. AR DID NOT MAKE ANY SUBMISSIONS ON THESE GROUNDS.. 10. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. 11.. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AND THE CO FILED BY THE ASSESSEE IN THE A.Y. 2007-08 ARE DISMISSED W HILE APPEAL OF THE ASSESSEE IN THE A.Y. 2004-05 IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (RAJPAL YADAV) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBE R *KAVITA COPY FORWARDED TO: - 1. DCIT CIRCLE- 31(1),/ ITO WARD- 31(2) & WARD 31 (4),C.R. BUILDING, 2. M/S SURYA KIRAN MAINTENANCESOCIETY (REGD.),SURY A KIRAN BUILDING, KASTURBA GANDHI MARG,NEW DELHI 3. CIT CONCERNED 4. CIT(A)-XXVI, NEW DELH I 5. DR ITATG BENCH,NEW DELHI 6. GUARD FILE . TRUE COPY BY ORDER, DEPUTY REGISTRAR,ITAT